SAS case, on vertical integration Essay Example | Topics and Well Written Essays - 2000 words - 1

SAS case, on vertical integration - Essay Example The results of restructuring bore fruits as the company begun to grow increasingly. The company paid exceptional attention to catering, and credit card sectors of the aviation industry. The company embarked on vertical integration in these sectors with an aim to recover and grow. This essay seeks to give an analysis of a case in a vertical integration approach that was adopted by the Scandinavian Airline System. Strategic analysis involves identification of the internal and external factors which is vital in the implementation of an organizational risk. In the quest to achieve its objectives, the company assesses its strengths and weakness. The company also weighs its opportunities and risks (Randoy & Strandenes 1997). This helps in achieving the set organizational goals. After World War II, SAS was launched. The goal of the shareholders was to control air travels on the entire globe. This meant that the company had to develop strategies that it makes it operational and dominant in a ll continents. However, the company was faced with unprecedented challenges from leading competitors in the aviation industry marketplace (Gustafsson & Edvardsson 1999). According to research, the changes in the management that come about in 1981 led to some significant improvement. In the Scandinavian region, SAS rose to become the largest and the most influential airline company. The results were attributed the SAS’s vertical integration (Peyrefitte & Brice 2002). SAS has the ownership of air travel services, hotels and airlines. The company faced immense challenges in 1998. Competition from rival companies was causing a trend of loses in the company. This necessitated the use of different and effective management strategies for SAS to remain competitive. Vertical integration in the aviation industry refers to the merger of two or several companies or entities that are involved in the development of services and products in the same path. In this case, travel agents, hotels and airlines could be perceived to be a similar path in aviation business (Peyrefitte & Brice 2002). The goal of vertical integration is to achieve services and products at minimal cost. It is a strategic management concept that aims at increased profits (Havel 1997). The move helps the aviation industry players to monopolize service delivery and reduce the cost of transaction (Holloway 2007). This vertical integration strategy is incorporated by the quality control mechanisms in the aviation industry and this helps them in ensuring delivery of quality products and services in time (Gustafsson & Edvardsson 1999). Vertical integration has some demerits. According to Anderson and Baterman, vertical integration can result in high cost of organization (Havel 1997). This is attributed to the complexity of the structures of the aviation organizations. The SAS executed vertical integration in the year 1998. The SAS acquired travel companies including hotels, airlines, travel agents, and g round services. The move benefits the company to date. The strategy helped the company in increasing the passenger traffic and revenues (Peyrefitte & Brice 2002). The SAS was able to become a key service provider in the international marketplace. The concept of vertical integration and its importance was first introduced to SAS in the year 1988. According to SAS, the organization turbulence it experienced was due to government interference